UNDP and Fortis team up to leverage carbon finance for sustainable development

The United Nations Development Program (UNDP) and banking and insurance company Fortis have announced an agreement naming Fortis the financial services provider for the UNDP's MDG Carbon Facility. The announcement also marks the operational launch of the facility, an innovative means of harnessing the vast resources of the carbon market to bring long-term sustainable development to a more diverse share of developing countries.

Under the terms of the partnership, announced in Berlin just prior to the G8 summit, UNDP will help developing countries conceive projects intended to reduce emissions of greenhouse gases, and will ensure that these projects meet the Kyoto Protocol's agreed standards and deliver real, sustainable benefits to the environment and broader human development.

Fortis will purchase, and sell-on, the emissions-reduction credits generated by these projects. The proceeds from Fortis's purchase will provide developing countries and communities with a new flow of resources to finance much needed investment and to promote development.

MDG is short for Millennium Development Goals, the specific targets, agreed by United Nations member states, for diminishing global poverty and achieving major advances in health, education, environment and equality by 2015.

The Clean Development Mechanism, or CDM, has been at the centre of a rapidly expanding, billion-dollar international market for carbon credits. However, early signs indicate that the CDM is unlikely to deliver the broad-based benefits that many hoped it would, at least in the medium to short term. CDM projects have so far been limited in geographic reach, restricted mainly to Asia and Latin America, and have focused primarily on "end of pipe' technologies that generate limited benefit for long-term sustainable development.

The MDG Carbon Facility aims to address these limitations by capitalising on Fortis's resources and substantial carbon experience, together with UNDP's specialised expertise and global reach.

Once a developing country gains proficiency in carbon finance, attracting private-sector investment and developing project technologies that deliver longer-term benefits, the MDG Carbon Facility will exit that market, having accomplished its market transformation objectives and no longer needing to play its role as a bridge between developing countries and the global carbon market.

The partnership between UNDP and Fortis covers an initial pipeline of projects which will generate 15 million credits during the Kyoto Protocol's first commitment period (2008-2012). UNDP and Fortis will begin evaluating potential projects for the facility immediately.